Yip Wan-chiu v. Magnificient Industrial Ltd
Read the full judgment text of CACV 47/1973 on BabelCite. This Court of Appeal judgment.
1. We were at one time in considerable doubt as to whether we ought even to hear counsel upon this appeal, Mr. Jackson-Lipkin, for the appellant, having told us with his customary frankness, that he approached his task with some diffidence and some personal hesitation.
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CACV000047/1973 IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 47 OF 1973 (On appeal from K.C.J. 6083/73) -----------------
----------------- Coram: Full Court (Huggins, McMullin and Pickering, JJ.) Date of Judgment: 26th April, 1974. ----------------- JUDGMENT ----------------- McMullin, J. : 1. We were at one time in considerable doubt as to whether we ought even to hear counsel upon this appeal, Mr. Jackson-Lipkin, for the appellant, having told us with his customary frankness, that he approached his task with some diffidence and some personal hesitation. 2. The point at issue is whether or not damages for breach of a contract of employment are, in Hong Kong, liquidated or unliquidated. The learned District Judge from whose decision this appeal lies had held them to be unliquidated so that there lay upon the appellant a duty to mitigate the damages. The same view had previously been expressed by several other judges of the District Court. 3. The amount at issue in the present case is only some $560. Counsel conceded that it has always been his view that damages in such cases were unliquidated and, that being so, he would in the ordinary way either not have accepted, or would have returned, his brief but for the fact that the Attorney General and the Director of Legal Aid want a ruling on the matter from this Court. The Commissioner of Labour had held the view that s.6(1) of the Employment Ordinance (Cap. 57) had altered the Common Law so as to provide for liquidated damages of one month's salary; the draftsman was also of that opinion and, despite recent decisions of the District Court to the contrary, was unwilling to amend the legislation without some guidance from this Court. 4. It thus appeared to us that we were being asked to enter upon an academic exercise not so much for the benefit of the legally-aided appellant in this case, nor for the benefit of any litigant, but for the satisfaction of various organs of the Executive and that what was really required of us was an advisory opinion. Our suspicion that this was an improper use of this Court was reinforced by the knowledge that when it was sought to serve the notice of appeal upon the respondent company, nobody was to be found at the registered offices of the company so that service had to be effected by leaving the notice on the premises; it thus appears that the respondent company might well be defunct except in name, with the result that any decision of this Court in favour of the appellant would amount, so far as she is concerned, to nothing more than an empty victory. Nobody appeared on behalf of the respondent company upon the appeal. 5. We adjourned to discuss the course which we should adopt and were subsequently about to inform counsel that we did not consider that we should hear him when, before we had done so, he asked to be heard further. To this we agreed and there emerged a shift of emphasis in the proposed argument, to the effect that if the damages under s.6(1) are not actually liquidated damages, the subsection involves a pre-quantification of damages which are not then subject to mitigation on the part of the appellant. Counsel warmed to this theme and we decided to hear him out, which we did over the course of a full day's hearing. 6. The appellant was employed by the respondent company on a piece-work basis her average income being $600 per month. On the 23rd of August 1972 having worked for that company for about two years she was dismissed without notice or payment in lieu thereof. She claimed one month's wages as payment in lieu of notice under Section 6(1) of the Employment Ordinance. There was a mistake in the particulars of her claim in that the amount stated as being the sum of her income in the month immediately preceding her dismissal (the relevant amount for the purpose of calculating the rate of her wages under the provisions of Section 6(3) of the Ordinance) was originally stated as $330 but at the hearing this was, with the leave of the court, amended to $600 and, although the amount claimed in the prayer was not likewise amended, it is clear that it must have been intended that that should have been done as well. 7. The hearing itself concerned only the question of damages since the defendant company had allowed judgment to go by default against it in the first instance and a default judgment was in fact entered against the company on the 4th of September. The matter was set down for hearing on the question of damages and upon the 26th of September the plaintiff was called and she gave evidence to the effect that after her dismissal she had not sought to find other employment for some two months because she was not, as she put it, "interested in getting a job" during that time. She also said that she was being paid roughly the same amount of money in her subsequent position as she had been paid when in the employment of the defendant company. The defendant did not give evidence at the hearing and Mr. Fairbairn then addressed the Court and asked for an adjournment for the purpose of adducing further authorities on the question of damages. On the 12th of October the Court heard his submissions and on the 7th of November in a considered ruling the learned District Judge awarded nominal damages in the sum of $40.00 for wrongful dismissal together with the costs of the proceedings. The basis of his ruling was that the appellant had failed to mitigate her damage occasioned by the wrongful dismissal by taking up employment in an equivalent occupation, which she admitted she could have done, immediately thereafter. He reviewed the many authorities put before him including certain decisions in recent years by judges in the District Courts and came to a conclusion expressed in the following words :
Mr. Jackson-Lipkin very fairly and properly informed us that in his opinion the weight of authority favoured the view that damages for breach of contract of this description were ordinarily to be regarded as unliquidated damages. Nevertheless he was prepared to direct our attention to some authority which tended against that view and moreover he wished to urge upon us considerations of perhaps greater substance arising from the terms of the Employment Ordinance itself in support of the appellant's case. Counsel whose position was not rendered any the easier, if he will pardom me for saying so, by his having to discharge a role somewhere midway between amicus curiae and advocatus diaboli, sought to resolve his difficulty by an ingenious compromise. Thus while maintaining that damages for wrongful dismissal in a contract of service such as this are in general to be considered as unliquidated yet where the contract itself specifies a definite period of notice for termination the wages applicable to that period are to be regarded as a pre-quantified figure conclusive between the parties by their agreement in relation to that element of damage alone. Other consequences of the breach however remain at large and may fittingly be made the subject of a general and unquantified claim for damages. I do not find myself persuaded to this view. If it be considered that damages for the breach of such a contract as this are in any sense at large so that the court is charged with the duty of considering all the consequences which naturally flow from the breach it is difficult to see why questions of mitigation should not arise equally in respect of the whole range of pecuniary loss for which damages are sought by way of compensation. For this purpose I find no difficulty in accepting the implications of the hallowed principle of law which, [to quote the words of Parke, B. in Robinson v. Harman(1)], is to the following effect :
If subsequent to the breach a plaintiff takes steps to repair his own position and succeeds partially in doing so he is to that extent the less disadvantaged by the breach. In putting him back into as good a position as he would have been in had the breach not occurred the Court is surely entitled in all cases to have regard to the fact that by his own act of self-help he has in fact mitigated his loss. On this aspect of counsel's contention I prefer to accept, as expressing the state of the Common Law at the present time on this topic, the words used by Erle, C.J. in Beckham v. Drake(2) at page 606 :
8. This very general principle must of course be understood in the light of the even broader principle that such damages are unliquidated in the sense that they are not restricted solely to recovery of wages. Thus "what time would be lost" upon wrongful dismissal is the temporal measure only; the value of it may include the value of such things as accommodation, tips, bonuses etc. Conversely if nothing has in fact been lost damages will be nominal only. Citing Yelland's case(3); and Lindsay v. Queens Hotel Co.(4) the authors of Mayne and MacGregor on Damages at page 523 of the 12th Edition describe the normal measure of damages on breach in these terms :
I agree with counsel that the Statement in Halsbury, Volume 25 paragraph 995, that wages are the measure and are to be regarded as liquidated damages is too wide. 9. It is true, as Mr. Jackson-Lipkin points out, that where the failure to agree to terminate by payment of the relevant sum is due to the refusal of an employer to make the offer and not to the refusal of the employee to accept it, the latter, although the injured party through the other's default, will be penalized in his action for damages by encountering the duty to mitigate; whereas if the employer obeys the law and either pays, or in good faith agrees to pay, the other party may without penalty at once seek and obtain alternative employment and be under no duty to account to his former employer for any remuneration thereby obtained. Counsel asks us to say that this result is so clearly inequitable that it should be avoided by recognising that even at Common Law the wages element in any claim where a fixed period of notice has been stated is to be regarded as a liquidated sum i.e. an agreed pre-estimate of the money value of one consequence of instant termination which - unlike any other consequent detriment - is not to be diminished by reference to the duty to mitigate. This he suggests is the Common Law position which the Legislature intended to affirm in Section 6. For myself I do not find any good warrant for this view in the eases to which we have been referred. It is true that there are many decisions in which the period of notice has been employed as a yard-stick for damages upon breach. Where no other detriment has in fact resulted from the breach that is in effect the measure of damages. Cases such as French v. Brockes(5) and Hartley v. Harman(6) and the Commonwealth cases to which we have been referred which suggest that damages on termination without notice are limited to the wages which would have been earned during the period of notice go, as it seems to me, upon special facts and are insufficient to dislodge the general principle that on breach the action lies for unliquidated damages. Many authorities speak against the other view, for example : Maw v. Jones(7); Davys v. Richardson(8); Lindsay v. Queens Hotel Co.(4); Manubens v. Leon(9); Faberlan v. Mckay(10); McKean v. Cowley(11); MacDonnell v. Marston(12). These cases make it clear that where the dismissal was wrongful the unpaid wages are an element only and not the sole measure of damages and, furthermore, even if they are to be regarded in some sense as a pre-quantified clement of damage they are not immune from the ordinary rule as to mitigation on breach. 10. I do not therefore think that the Common Law action for damages is to be analysed in the way suggested or that the Legislature has intended by the language used to interpret the Common Law in that way. 11. Counsel was on somewhat stronger ground when he turned to consider the terms of the Ordinance. For it seems to me, and whether it was intended or not, that the plain words of Section 6 have made a distinct inroad upon the old Common Law rule in so far as master and servant contracts are concerned. I do not think however that the present question is to be resolved by any of the ordinary considerations deriving from the distinction between liquidated and unliquidated damages at Common Law. The important distinction lies between the options available to the litigant. As I see it the Legislature has stepped in and imposed upon the Common Law situation an exception based upon a wholly different principle. What it amounts to is a statutory quantification of the value in average cases of the right to disregard all contractual or statutory requirements as to the period of notice prior to termination. Either party to the contract may "buy himself out" of the need to give such notice by agreeing to pay the statutory sum. The effect of that is, as the learned District Judge rightly observed, that the contract is terminated without breach and that thereafter an action for damages based upon breach will not lie. Any action raised must then be upon the basis of that agreement. In any such action questions of mitigation will be irrelevant. The employer or the employee, as the case may be, immediately upon termination has chosen an exclusive remedy in the form of a quantified sum. That sum is offered and accepted upon the basis that both parties are content to have all actionable detriment arising from mere lack of notice quantified as provided in the Ordinance and discharged by payment of that sum. 12. The option offered by Section 6 is however one of mutual agreement. I understand that Section to mean that the parties must agree through the ordinary process of offer and acceptance before the option can become effective. It is always open to the employee, for example, who feels that his damage from instant dismissal is likely to be greater than could be compensated merely by the payment of one month's wages in lieu of notice, because of collateral or fringe benefits secured to him under the terms of the contract, to ask for a month's notice instead. In such a case, therefore, where no agreement has been reached and no notice has been given and the employee is compelled to leave his employer's service, and assuming that he diligently searches for equivalent employment and fails to find the same immediately, he may then sue his employer for the whole value of the damage occasioned by the breach. For in that case there has been a breach through failure to give the requisite notice of termination and the mere offer of a month's wages in lieu, since it has not been accepted, and since there has therefore been no agreement in relation thereto, does not of itself absolve the employer from the need to give notice. Although I was at first drawn to the idea that the words "by agreeing to pay" in Section 6 were to be understood as meaning : "by offering to pay"; or "by undertaking to pay", yet on reflection it seems to me that such an interpretation raises a very real difficulty. Where the offer has been accepted no problem arises for then there is an agreement on which the defaulting party may be sued. But where, for example, the employee refuses to accept the offer or undertaking and later, being perhaps unable to find other employment, wishes to pursue a claim against the employer he may find himself barred out of any approach to the Courts either by way of the statute or of the Common Law. For, as to the former he may be met with the answer that the offer having been refused and the situation of the parties having altered the employer was under no obligation to renew it; while as to the Common Law, the answer would be that there could be no action for breach since the contract had been lawfully terminated at the instant when the employer had done all that the Ordinance required of him by merely offering or undertaking to pay. 13. As to the seeming injustice arising under the Section if it is interpreted in the way that I have suggested, it must be remembered that there is another side to that coin. Admittedly where the law has been obeyed and the claim to the statutory sum arises then, in a subsequent action, the nonterminating party need not account for his interim behaviour or bring his gains into reckoning; but what he recovers is solely what was agreed, neither more nor less. On the other hand where the law has been disobeyed and the action is for damages for breach the damages are at large and there may well be valuable claims in addition to wages such as to offset and perhaps to overtop any diminishment arising from the duty to mitigate. If the Legislature had intended to abolish, in the case of these contracts, the ordinary claim for damages and to substitute for it an exclusive remedy under the Ordinance one would have expected to find a provision taking the offer of the stipulated sum mandatory on the one hand and, on the other, the acceptance of that offer a necessary pre-requisite to any action for damages arising from the contract. 14. If this be the correct view of the matter then it would not be true to say either that damages for breach of contract are, at Common Law, in some cases liquidated or else that the right to sue for damages for breach of a contract of service has been replaced by the provisions of Section 6 but rather that that Section provides an option by way of alternative to the ordinary Common Law claim for damages. It is an option available to the employee as to the employer but it can be exercised only by mutual agreement. The agreement is the heart of the matter. Where there is no such agreement the parties are relegated to their rights under the Common Law and the remedy available to them is the ordinary action for damages for breach. I do not think that the sum stipulated in Section 6 can be regarded as liquidated damages in the sense that it is a pre-estimate of the expected consequences of a breach. There may often be consequences of the abrupt termination of a contract which will not be adequately covered by a sum equivalent to a month's wages and the injured party will therefore not be "put in as good a position" as if the contract had been performed. I cannot accept the compromise suggested by Mr. Jackson-Lipkin viz. : that upon breach it is open to the employee to bring an action for damages which can be regarded as liquidated in respect of one item only thereof, the item of wages, all remaining heads of loss being at large. Rather does it seem to me that the present position is that there are two possible types of action open to the employer or to the employee and which action is available will depend on the course events have taken. The first is the ordinary remedy by was of an action for damages and the second arises where there has been an agreement to pay in lieu of notice, the claim in the latter case being limited to what one might call the quantified statutory damages secured to the injured party by the Section. 15. In the present case no such agreement was arrived at between the parties and, in agreement with the learned District Judge, I would hold that the action was an action for unliquidated damages and that the figure of nominal damages awarded was justified in view of the plaintiff's proved failure to mitigate her loss. 16. I would therefore dismiss the appeal. Appellant's costs to be taxed under Regulation 15 of the Legal Aid Regulations.
Representation: (1) 1 Exchequer 850. (2) (1849) 2 H.L.C. 579. (3) (1867) I.R. 4 Eq. 350. (4) (1919) 1 K.B. 212. (5) (1830) 6 Bing. 354. (6) (1840) 11 A. & E. 728. (7) (1890) 25 Q.B.D. 107. (8) (1888) 21 Q.B.D. 202. (9) (1919) 1 K.B.D. 208. (10) (1920) W.L.D. 23 [S.A.L.R.] (11) L.T. Vol. 7 N.S. 828. (12) (1884) 1 Cab. & E1. 281. IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 47 OF 1973 (On appeal from K.C.J. Action No.6083 of 1973) -----------------
----------------- Coram: Huggins, McMullin and Pickering, JJ. Date of Judgment: 26th April, 1974. ----------------- JUDGMENT ----------------- Huggins, J.: 17. I agree that this appeal must be dismissed. The particulars of claim alleged merely that the Plaintiff was improperly dismissed by the Defendant from her employment "without notice or payment in lieu thereof". The prayer claimed (1) one month's wages as payment in lieu of notice under s.6(1) of the Employment Ordinance and (2) damages for wrongful dismissal. 18. Section 6(1) is in these terms:
This provision interferes with the long-established principles of the Common Law and ought to be construed strictly. What I have already said is in my view enough to dispose of the claim under that subsection because the Appellant did not plead facts which would support such a claim. The intention of the Legislature appears to me to have been to provide a novel manner of terminating a contract of employment but from there I find myself at variance with McMullin, J. - a fact which may support the view that this legislation is not as clear as it ought to be. He takes the view that s.6 contemplates a mutual agreement to terminate: I think it contemplates a unilateral termination by one party or the other, for it is only one party to the contract who has to "agree" to do something, i.e. to pay money, and I understand that to mean "indicate his willingness to pay" or "promise to pay". It would not have required a statute to lay down that a contract of employment, like any other contract, can be terminated by mutual consent and I find nothing in the section which is indicative of a situation involving such consent. As it seems to me what the language of the section provides is that either party may, by indicating at the time he gives notice of his intention to terminate the employment his willingness to pay a sum equivalent to one month's "wages" as defined in the Ordinance (and such payment must probably be without deductions under Part IV of the Ordinance: s.15), bring the contract to an immediate end without being guilty of the breach of contract which termination without notice would otherwise have involved. On consideration I see no difficulty arising from the fact that a master who terminates his servant's employment under s.6 might have to pay more than he would if he wrongfully dismissed him without notice and the servant mitigated his loss: that is the price the Legislature has decided he should pay for his new right, a right which he may exercise or not at his will. On the other hand, the servant may receive less than he would have done had the contract been performed, or had he been wrongfully dismissed and been unable to mitigate his damage. That is the price he has to pay for having "the bird in the hand", i.e. for the certain entitlement to a whole month's wages not less than seven days after completion of the contract: s.15(1). If a contract is lawfully terminated by this novel method it will necessarily follow that no action will lie for damages for breach of contract by reason of the failure to give notice. If payment is tendered and accepted, no right of action will normally arise by reason of the lawful termination of the contract. It may be that a party to whom one month's wages were tendered within the prescribed period but who declined to accept, could subsequently sue for them, but, if so, he would have to plead the promise to pay as the foundation of his claim under the section. Similarly it may be that a party who gave notice under s.6 but failed to pay one month's wages within the prescribed period could be sued for them, or it may be (and I express no view as to these matters) that he could elect to sue for damages for breach of the contract of employment on the basis that failure to make due payment would deprive the defendant of the right to set up a termination under s.6. 19. In the present case the Appellant sued for damages for breach of the contract of employment on the basis of wrongful dismissal and did not allege that the Respondent had lawfully terminated the contract by agreeing to pay one month's wages. He persuaded the learned judge that there was a breach of contract and, even if there had been an alternative plea, it would have followed that the contract could not have been held to be lawfully terminated under s.6 and that that section could have had no relevance at all. Damages for breach of contract are unliquidated save where the parties in their contract have agreed that they should be liquidated. No such agreement was pleaded here. I find no place for the "ingenious compromise" which counsel has suggested for our consideration and in my view the authorities do not compel us to recognise such a principle applicable only to contracts of service. If, as I think was hinted, the Legislature wishes to introduce some such extraordinary principle it will have to do so in the clearest terms. In my view s.6 can have no application whatever where what is claimed is damages for breach of contract. 20. It was for the Appellant in this case to prove her damage and the learned judge correctly took into account the fact that no attempt had been made to mitigate the loss. 26th April, 1974. Representation: IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 47 OF 1973 (On appeal from K.C.J. 6083/73) -----------------
----------------- Coram: Full Court (Huggins, McMullin and Pickering, JJ.) Date of Judgment: 26th April, 1974. ----------------- JUDGMENT ----------------- Pickering, J.: 21. I am in agreement with the result arrived at by my brethren. As to the method of arriving at that result, I would follow the path trodden by my brother McMullin. Appellant's costs to be taxed under the Legal Aid Regulations Representation: Jackson-Lipkin (Fairbairn & Kwok) for Appellant. |
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